DRS: 12-715(a)-2, Modification of S corporation items in shareholder’s income tax return

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Conn. Agencies Regs. § 12-715(a)-2.  Modification of S corporation items in shareholder’s income tax return.

(a) In determining the Connecticut adjusted gross income of a resident shareholder of an S corporation, any of the modifications referred to in §§12-701(a)(20)-2 and 12-701(a)(20)-3 of Part I that relate to an item of S corporation income or loss shall be made with respect to the pro rata share of the shareholder in such item as determined for federal income tax purposes, whether or not, in the shareholder’s federal income tax return, such item is reflected in such shareholder’s pro rata share of the separately computed income or loss or in such shareholder’s pro rata share of the nonseparately computed income or loss.

(b) In determining Connecticut adjusted gross income, a resident shareholder shall combine the modifications relating to such shareholder’s pro rata share of any S corporation item with the modification relating to any similar item from sources other than the S corporation. For example, if some of the S corporation income is derived from interest on bonds of another state, not subject to federal income tax, and if the individual income of a resident shareholder also includes similar bond interest, such shareholder shall add to federal adjusted gross income both the pro rata share of the S corporation income from such bonds and the interest from similar bonds that such shareholder received individually rather than from the S corporation.

(c) The amount of any modification to be made by a shareholder with respect to an S corporation item of income or loss is to be determined in accordance with such shareholder’s pro rata share of such item for federal income tax purposes. If a modification relates to an item that is not taken into account for federal income tax purposes (such as interest income on bonds of other states), each shareholder’s modification in respect to such an item is determined by such shareholder’s pro rata share for federal income tax purposes of the S corporation income or loss.

(d) The modifications covered by this section do not apply to any item attributable to the shareholder directly and not reflected on the Connecticut S corporation informational return (Form CT-1120SI), such as a gain that the shareholder realizes on the sale of shares in the S corporation.

(e) While this section pertains to Section 12-715(a) of the general statutes, for purposes of supplementary interpretation, as the phrase is used in Section 12-2 of the general statutes, the adoption of this section is authorized by Section 12-740(a) of the general statutes.

(Effective November 18, 1994.)